The investment activity in the primary market picked up in February 1999 as compared to the previous month. The corporates raised Rs.870.93 crore in February as compared to Rs.346.98 crore in January 1999 showing a rise of more than 50 per cent. During February 1998 the corporates had mobilised a small amount of Rs.49.5 crore by making five issues. On financial year basis, the capital mobilised by the corporates increased by 26.3 per cent from Rs.4074.05 crore in April-February 1997-1998 to Rs.5146.51 crore during April-February 1998- 1999. Though for the financial year 1998-99 so far resource mobilisation through the public and rights issues in the primary market was 26.3 per cent higher compared with the same period last year, the rise is somewhat misleading and does not signal a revival of the primary market. For instance, about 84.0 per cent of the capital mobilised during the year was on account of financial institutions and manufacturing sector accounted for a small share.

The secondary market witnessed less volatility in the month of February 1999 compared to January 1999. As regards investment FIIs, there was positive inflow of US $ 76 million. The mutual funds, however, have been raising far larger resources from the primary market since the introduction of the new Mutual Funds Regulations in 1996. In 1998-99 (April-January) the mutual funds have raised more than Rs.19000 crore. For the entire year of 1997-98, total amount collected by the mutual funds was much lower at Rs.11406 crore.

The primary capital market is expected to perform better as mutual funds have been given substantial fiscal incentives for investing in equity capital. The budget for 1999-2000, has proposed to exempt the income of unit holder received from UTI or from mutual funds from income tax. It has reduced tax rates on long-term capital gains in regard to shares and securities from 20 per cent to 10 per cent for domestic investors. In addition to these measures, reduction in interest rates following the announcement of RBI to cut repo rate by 200 basis points, Bank Rate by 50 basis points and Cash Reserve Ratio by 50 basis points would ease liquidity constraints in the financial system and it may help primary as well as secondary market.